As prime minister, India's Modi would be polarizing, promising

Likely new leader, Narendra Modi, has baggage to carry and promises to keep

May 15, 2014

Hindu nationalist Narendra Modi ispoised to become India’s prime minister. A final tally of the country’s vote is due Friday. (STRINGER, REUTERS)

Hindu nationalist Narendra Modi took office as chief minister in the western Indian state of Gujarat not long after 9/11. Within months, a horrifying massacre occurred under his watch. A Muslim mob attacked a train carrying Hindu pilgrims. A fire broke out, killing at least 58 passengers. Riots followed that left more than 1,000 dead, mainly Muslims. Modi's critics accused him of failing to halt the religious violence, and indirectly encouraging the Hindu majority to retaliate against the Muslim minority in his state.

Today, Modi is poised to become prime minister of the world's largest democracy, on a pro-business platform promoting economic development. Exit polls show Modi with a substantial lead in national elections held in phases over the past six weeks. A final tally is due Friday.

The polls, though not as accurate as their American counterparts, suggest that Modi's Bharatiya Janata Party will win decisively, unseating the Congress party that has held power for 10 years. Modi and his allies might obtain enough votes to rule without having to form a coalition government. If so, it would mark the first time in three decades that a leader of India's 1.2 billion citizens has ruled with such a mandate.

What should Americans think?

In the aftermath of the massacre, the U.S. made Modi an international pariah. The federal government banned him from obtaining a visa to enter this country, under a 1998 law aimed at protecting international religious freedom. An Indian court recently cleared Modi of direct responsibility for the massacre. U.S. diplomats met with him this spring to soften the American stance against him. They reportedly assured him that if he is elected head of state, the visa ban will be lifted.

Because of his history, though, Modi's ascension poses a diplomatic problem. The U.S. must stand up for human rights and religious freedom around the world. Yet it has no choice but to deal with the leader of this important, rising nation. Modi will have to prove, quickly, that he is credible and trustworthy.

Modi has been saying the right things. Throughout his campaign, he has avoided inflammatory anti-Muslim rhetoric. He has signaled a measured approach to the volatile relations between India and the neighboring Muslim state of Pakistan. Had he fanned the flames of hate, we would be extremely concerned.

Instead, Modi embraced a campaign theme familiar to U.S. pols: Jobs, jobs, jobs! He wants stronger commercial ties with the West. He wants expanded trade. He wants opportunity for millions of impoverished Indian citizens. Sounds to us like the right priorities of prosperity.

India's economy has been slowing, along with much of the developing world. Having raised voter expectations, Modi must deliver stepped-up growth, greater foreign investment and a rise in domestic living standards, reversing recent trends, while keeping inflation under control.

Modi needs, in short, an economic miracle worker. Lucky for him, India has one: Raghuram Rajan, leader of India's central bank. Rajan is brilliant economist and University of Chicago finance prof who took a leave of absence last year to head the Reserve Bank of India. A top Modi aide recently signaled that Modi intends to ask Rajan to remain in place.

It's easy to see why. If India is to prosper in a tough environment, it must maintain the confidence of global markets. Rajan might be the world's most credible central banker. Earlier this year he gave a talk at the Brookings Institution, criticizing central banks that print money to stimulate flagging domestic economies. Like this page, Rajan is skeptical about the U.S. Federal Reserve's latest bond-buying spree, known as "QE3."

Too often, Rajan said, central bankers fail to take into account how their stimulus measures create booms and busts abroad. The Fed's policies sent easy money pouring into India and other developing countries during and after the Great Recession. Now that the Fed is tapering QE3, India feels whiplashed. Rajan pleaded for better cooperation among the world's central banks.

Did you hear that, Ben Bernanke, former Fed chairman — and stimulus champ of the world?

Turns out, Bernanke did hear that: He was sitting in Rajan's audience. After Rajan's remarks concluded, Bernanke rose to ask the first question. What followed was a polite agreement to disagree. It speaks to Rajan's stature that Bernanke took his views seriously, and felt the need to respond.

Because of Modi's baggage, he will be a polarizing figure if he becomes prime minister. But with Rajan steering India's economy, Modi has a chance to overcome his past and fulfill his promises to voters.

India has fantastic potential. It could be the next sleeping giant to awaken and raise hundreds of millions from poverty, as China did over the past three decades. The rising stature of a democratic India also would be good for its political and economic allies — America included.